After a remarkable six-day streak of record highs, the gold market is taking a breather, facing some technical selling pressure as the weekend approaches. On Thursday, strong buying momentum briefly pushed gold prices above $2,700 an ounce, but concerns are mounting among analysts that the precious metal’s recent surge may be unsustainable. As of Friday, December gold futures traded at $2,669 an ounce, reflecting a nearly 1% decline for the day, although prices are still up about 1% compared to last Friday.
Ole Hansen, Head of Commodity Strategy at Saxo Bank, noted that following a substantial U.S. rate cut, gold prices are stabilizing, leading to signs of buying fatigue. “We may be nearing a necessary consolidation or even a correction. I estimate that prices could drop by 4–6% without jeopardizing the overall bullish sentiment,” he commented in a Friday note.
Hansen identified initial support at $2,670 an ounce, with further levels to watch at $2,547 and a worst-case scenario of $2,500.
Echoing this sentiment, Alex Kuptsikevich, Senior Market Analyst at FxPro, indicated that gold may be running out of upward momentum, increasing the risk of a correction. “Gold has crossed above the 161.8% Fibonacci extension level of its two-year rally since August 2018. As we approach historical highs, finding new upside targets becomes increasingly challenging,” he explained.
Looking ahead, Kuptsikevich highlighted next week’s employment data as a potential risk for gold prices. “The recent rally poses a risk for short-term traders looking to sell without reliable signals. A negative weekly close could serve as such a signal, and we may see this as early as next Friday, coinciding with the release of U.S. labor market data,” he added.
Despite the prevailing caution, some analysts remain optimistic about gold’s trajectory. Bart Melek, Head of Commodity Strategy at TD Securities, is projecting gold prices to rebound above $2,700, which he sees as his year-end target. Last week, TD Securities exited a tactical short position with a loss exceeding 4% as they prepared for potential market disappointment post-Fed meeting.
Melek pointed to the Federal Reserve’s recent 50-basis-point rate cut and indications that rates may drop to 3% by 2026 as favorable for gold. “The Fed’s easing strategy supports a weakening labor market, even in the face of persistent inflation,” he stated.
On Friday, the U.S. core Personal Consumption Expenditures (PCE) Index, which the Federal Reserve uses as a key inflation gauge, showed a rise of 2.7% over the past year, slightly up from 2.6% in July. Headline inflation increased only 2.2% due to a drop in energy prices, but economists note that stubbornly high core PCE suggests inflation is becoming entrenched in the economy.
“The Federal Reserve’s focus on achieving full employment creates a favorable environment for gold,” Melek added, emphasizing the risks of sustained high inflation alongside declining real rates.
James Stanley, Senior Market Strategist at Forex.com, also predicts that gold could continue its upward trend. “While gold is overbought on multiple timeframes, it can still push further into this territory,” he noted.
However, Stanley advises against chasing the market, suggesting that investors should consider buying on pullbacks. He sees initial support levels at $2,650, with further support at $2,635 and $2,600.
Amidst potential short-term volatility, Stanley asserts that central bank easing, particularly the Fed’s recent rate cuts and China’s significant stimulus measures, supports a bullish outlook for gold. “As the world’s two largest economies apply pressure to stimulate growth through equity markets, gold serves as the only hedge against global currency depreciation,” he explained.
Looking ahead to next week, Friday’s nonfarm payrolls report will be a major market focus, along with job openings and manufacturing activity data expected to generate volatility. Markets will also pay close attention to Fed Chair Jerome Powell’s remarks at the National Association for Business Economics (NABE) Annual Meeting, marking his first live address since the central bank’s recent monetary policy meeting.
“Fedspeak has suggested a clear direction toward easing restrictions, but the pace remains uncertain. Powell’s outlook at NABE will likely draw significant attention,” fixed-income analysts at TD Securities noted in their Friday report.
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